Correlation Between Virtus Investment and Aristocrat Leisure

Can any of the company-specific risk be diversified away by investing in both Virtus Investment and Aristocrat Leisure at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Virtus Investment and Aristocrat Leisure into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Virtus Investment Partners and Aristocrat Leisure Limited, you can compare the effects of market volatilities on Virtus Investment and Aristocrat Leisure and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Virtus Investment with a short position of Aristocrat Leisure. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virtus Investment and Aristocrat Leisure.

Diversification Opportunities for Virtus Investment and Aristocrat Leisure

-0.01

Correlation Coefficient

Virtus Investment  Aristocrat Leisure

Good diversification

The 3 months correlation between Virtus and Aristocrat is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Virtus Investment Partners and Aristocrat Leisure Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aristocrat Leisure and Virtus Investment is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Virtus Investment Partners are associated (or correlated) with Aristocrat Leisure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aristocrat Leisure has no effect on the direction of Virtus Investment i.e., Virtus Investment and Aristocrat Leisure go up and down completely randomly.

Pair Corralation between Virtus Investment and Aristocrat Leisure

Assuming the 90 days horizon Virtus Investment Partners is expected to under-perform the Aristocrat Leisure. In addition to that, Virtus Investment is 1.21 times more volatile than Aristocrat Leisure Limited. It trades about -0.15 of its total potential returns per unit of risk. Aristocrat Leisure Limited is currently generating about -0.09 per unit of volatility. If you would invest  4,100  in Aristocrat Leisure Limited on December 22, 2024 and sell it today you would lose (440.00) from holding Aristocrat Leisure Limited or give up 10.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Virtus Investment Partners  vs.  Aristocrat Leisure Limited

Virtus Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Virtus Investment Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Aristocrat Leisure

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aristocrat Leisure Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Virtus Investment and Aristocrat Leisure

The main advantage of trading using opposite Virtus Investment and Aristocrat Leisure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Virtus Investment position performs unexpectedly, Aristocrat Leisure can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Aristocrat Leisure will offset losses from the drop in Aristocrat Leisure's long position.

The idea behind Virtus Investment Partners and Aristocrat Leisure Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.